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Month: February 2015

One of the more confusing things to me about many self-proclaimed market supporters is their opposition to open borders immigration. They often use the same arguments they themselves reject when protectionists use them arguing against free trade. This is no coincidence; there is no difference between limiting the free-flow of goods in a nation and limiting the free-flow of people. Immigration restrictions are merely protectionists by another name.

Let’s start by looking at this from a strictly economic view. There are four main economic resources: land, labor, capital, and entrepreneurial ability. A growing economy utilizes the resources in their most efficient manner (in other words, producing as much output as possible given the resources available). Likewise, an economy grows when its resources are increased. Immigration is a resource (labor). Opening borders allows for the resource (labor) to flow to where it would be most productive or useful. Many self-proclaimed market supporters understand this when it comes to free trade, but seem to forget this simple lesson when it comes to immigration.

Now let’s look at this from a moral view. The United States is, by far, the wealthiest nation in the world. Even our poorest residents live better than 80% of the world. Many people throughout the world, and even the First World, do not have the opportunities afforded to Americans. Many live in crushing poverty or oppression, violence, hunger, or disease zones. These people can improve their lives and their families’ lives simply by crossing an invisible line. Just as a person might leave Detroit to seek opportunities in New York City, so do these immigrants leave their homes and seek opportunities in America. The US government, or those acting in its name, have no more right to stop people from coming over the border than the mayor of New York to stop people from coming from Detroit.

Let’s take a look at some of the arguments immigration protectionists use and explore a little why they are foolish or incorrect.

This argument depends solely on the fallacy that the economy is a fixed pie, that there are only so many jobs and for one person to get a job, another must lose his. A dynamic, growing economy is anything but fixed. As immigrants come into the country, they also bring with them new skills, opportunities, and can help diversify the economy. In short, they will help create jobs, not destroy them.

3) “They’re all welfare queens!”

This argument is a direct contradiction to #2, and yet I’ve heard the same people make the same arguments, often within a sentence or two of each other. But that’s not why this one is wrong. This one is just foolish right on its face. There are many countries with far more generous welfare systems than the US and many of those countries are the ones those immigrants are fleeing. Besides, if they were really so lazy, why would they trek thousands of miles, risk imprisonment, rape, violence, hatred, and potentially death, just to get free stuff? Doesn’t make sense.

4) “They’re going to vote so our country becomes like their loser country!”

Aside from the fact this is simply not true, it relies on two other major assumptions: 1) that the immigrants will become voting citizens and 2) they all hold the same political views. Both of these assumptions are laughable on their face. What’s also foolish about this argument is that it assumes these people are smart enough to flee a bad situation, but then dumb enough to recreate it. As an aside, it seems like a pretty shitty reason to deny someone the right to improve their life just because they might hold a different opinion than you.

5) “Our welfare state can’t handle it!”

This is a popular argument and made by some very intelligent people, including Milton Friedman. However, it is not an argument against immigration, but rather against big government. Besides, as I mentioned above, a dynamic economy is growing. These immigrants bring with them opportunities and help expand the pie. Some may end up on welfare, sure, but overall they help grow the economy and can actually reduce the number of people on welfare by creating jobs. it should also be noted this argument is also used by trade protectionists against free trade and the same people who reject this as a protectionist argument use it against immigration. The flawed thought process doesn’t change.

6) “People who seek to do us harm would exploit it!”

This is one of the stronger arguments against open borders. There may be some who seek to exploit open borders, but I still reject this argument for the same reason I reject gun control arguments because “someone bad might take advantage of it,”: freedom doesn’t become eliminated because one might abuse it. (By the way, this is also an argument protectionists use to hinder trade that immigration restrictionists reject).

Terrorists, political extremists, and other violent groups are certainly a problem in the world. Although the world has become a safer place, there remains many hot spots in the word, especially in Africa and the Middle East. While a good amount of this violence is government against its own people, some is committed by violent groups such as ISIS, The Lord’s Resistance Army, or Hezbollah.

So, where do markets fit in here? How can voluntary trade combat violence? By combating their recruitment ability.

Extremists have long been able to prey on poverty and vulnerability to gain recruits. History is full of such examples: 1920’s Germany, 2015 Greece, 1930’s America, 1910’s Russia, present day Middle East. When people are poor and out of work, that feeling of helplessness is easily exploited. The extremists can come up with all kinds of scapegoats to blame for the problems (the Jews, the Rich, the West, for example). Preying on the despair, the extremists can offer easy solutions (Come fight with us! We’ll take care of you and we’ll get back at the bad guys!).

Markets can help combat this by enriching the people. Markets have an amazing ability to make people wealthier, even the poorest members. By enriching the population through free and open markets, it would reduce poverty levels and make recruitment by extremists that much harder (as an aside, this is part of the reason why trade embargoes do not work well to end conflicts).

Would this solve the problem of extremism completely? Of course not. There are many factors that go into this problem, but I humbly offer my method to combat the problem, not through force, but through peace. If the Middle East were richer, ISIS would likely still be around somewhat, but their ability to recruit would be severely hamstrung.

This chart is Total Energy Co2 Emissions by the US (energy emissions account for the majority of CO2 emissions). The US, as you can see, is releasing fewer and fewer emissions. In fact, the 2013 level is the same as the early 90’s.

Why is this? It’s not due to government regulations. It’s due to markets, specifically fracking. Fracking (the process of removing natural gas and oil from shale), has released copious amounts of natural gas and oil to US miners, in turn reducing the price of these commodities. In fact, it has reduced prices so much, natural gas has become a much cheaper alternative for fuel than coal, in turn prompting many coal power plants to shift over to natural gas. Natural gas burns much cleaner than coal, so this means less CO2 emissions into the atmosphere.

So, while politicians bicker and argue, markets are actually doing something about it. The same goes for wages, poverty, safety, child labor, your name it.

Mostly because it doesn’t exist. Numerous studies from organizations of all stripes have found that the widely reported 23 cent wage gap between Men and Women doesn’t actually exist. When all factors are taken into account (education, benefits, tenure, similar positions), the gap narrows to about 6 cents. So does that prove discrimination? No…not really. A 2009 Department of Labor study found that the gap “may be almost entirely the result of individual choices being made by both male and female workers.”

Now, it is entirely possible that the 6 cents is discrimination. I have no doubt that there are some business people who do discriminate against women, but by doing so, they harm themselves.

Let’s look at this argument from a logical perspective. If, indeed, businessmen are after profits and only profits, and if indeed women are well-underpaid for the same work, a businessman would simply fire all his male workers, replace them with women for a significantly lower cost, and enjoy a huge market advantage. Given the fact that no one is doing this, it would suggest one of two things: 1) businesses are not greedy; they are contemptuous of women and would willingly sacrifice profits in order to discriminate or 2) there really is no wage gap.

Continuing from my earlier post, I wanted to elaborate upon the point I made that income inequality doesn’t equal standard of living. I also wanted to point out the difference between equality and quality.

According to the OECD, the US has greater income inequality than the UK. That shouldn’t come as a surprise to anyone. Who, then, would you think has the greater standard of living? In which country would you think the average person would be better off? If you guessed the UK, you’d be wrong. If the UK were a US state, it’d be the second poorest in the nation, behind only Mississippi.

“OK, Jon, but that’s a single data point! You can’t draw any conclusions off of that!” you cry. And you’d be right. Only a total fool would draw a conclusion from a single data point. So, let’s look at the entire OECD. The poorest in America live better than the poorest in every country but Canada, Australia, and Sweden, and they live better than the richest in Russia, Italy, Israel, Portugal, Brazil, Turkey, and Mexico.

Income inequality doesn’t matter. It is not a measurement of anything other than how income is distributed. It’s a useful political tool, but as an economic measurement it is about as useful as a blind valet.

Income inequality is a very popular topic these days. However, the whole issue is largely a red herring. Aside from the fact that, in the US anyway, income inequality is measured before taxes and transfers (meaning before things like tax breaks or WIC/Food Stamps/etc are taken into account), one’s standard of living is measured not by his income, but rather his consumption.

An example:

Imagine, if you will, a man named Doof invents a machine, the Utopia-inator. The Utopia-inator lives up to its name. By inserting just a single dollar into the machine per day, a person can receive anything he wants. All the dollars go to Doof. Doof, in a moment of inspired kindness, gives one of these machines to every single person on the planet. Doof now receives $7 billion in income per day. In this scenario, income inequality is highly unequal. Question: would this scenario be better or worse than current day? The obvious answer is better: everyone now has the same standard of living despite the fact income inequality is so high!

Now, you may object that my scenario is outlandish. It is done to an extreme to prove the point, but it is also true in this world as well. Despite rising income inequality, people of all classes, and especially the poor, are living better and better in America.

In the end, the way to combat poverty is not to make everyone equal, but to make consumption cheaper. Taking from one group to give to another will not accomplish that; all it will do is breed anger and distrust and greed. But markets, free markets, will accomplish this.

Walmart is the biggest private employer in America, with 1.3 million United States workers. And many of them will soon see a raise, in the latest snippet of corporate news that suggests a firmer job market is starting to enable workers to successfully demand higher pay.

The company said it would pay even its lowest-level workers at least $9 an hour starting this spring, comfortably above the $7.25 federal minimum wage, and push that to $10 in 2016.

…

Walmart is surely hoping to get plenty of good press for its decision to offer raises, but it’s worth examining the decision less based on whether they deserve applause on some moral grounds and more based on the economic forces that led them to act. Indeed, the best possible news would be if Walmart’s executives made this decision not out of a desire for good press or for a squishy sense of do-gooderism, but because coldhearted business strategy compelled it.

(Emphasis Added)

Every firm, no matter how big, must succumb to market pressures. This is a perfect example how how free markets work to raise wages, not lower them as opponents like to baselessly claim.

Another snippet:

Finding qualified workers is harder for employers now than it was then, and their workers are at risk of jumping ship if they don’t receive pay increases or other improvements. Apart from pay, Walmart executives said in their conference call with reporters that they were revising their employee scheduling policies so that workers could have more predictability in their work schedules and more easily get time off when they needed it, such as for a doctor’s appointment.

Market forces, not government, compelled this change. This is something to keep in mind the next time someone talks about capitalism being “a race to the bottom” or that government wage mandates are necessary.